A large and increasing number of children experience foster care in the United States. In 1999, nearly 600,000 children were in the U.S. foster care system with over 297,000 children entering foster care in that year. Many children who enter the foster care system are reunited with their biological parents or are quickly adopted. However, a significant number of children face long-term foster care, some whom are eventually adopted by their foster parents. Whether the goal is reunification or adoption, most observers agree that long-term foster care is detrimental to these children. A foster parent's decision to adopt his or her foster child carries significant economic consequences-forfeiting the foster care subsidy, and assuming responsibility for medical and educational expenses, to name a few. Because some of these factors are under the control of state and local governments, policymakers have the potential to alter the probability and timing of the adoption of foster children. We propose to use data from the 1998, 1999 and 2000 Adoption and Foster Care Analysis and Reporting System (AFCARS) to analyze the role that economic incentives, in the form of foster care and adoption subsidies, play in a foster parent's decision of when, or if, to adopt his or her foster child. The AFCARS data contain micro-level data on children in the foster care system and on children adopted, including information such as the child's age, gender, ethnicity, case goal, reason for removal, special needs status, length of stay, and time between the termination of parents rights and adoption. The data also contains information about the foster and adoptive caregivers. We will link the AFCARS data on individual children to state and county foster care regulations and subsidy rates by the child's state of residence. The first part of the analysis will focus on how long a foster parent waits before adopting his or her foster child, and specifically, how the foster care subsidy and adoption subsidy affect that decision. We will also analyze the effect of state programs designed to assist adoptive parents, such as reimbursing adoption expenses and providing respite care (short-term care provided to children with disabilities so that their families can take a break from the daily routine of care giving). The second part of the analysis examines the effects of these policies on the probability of adoption. This research will: 1) Identify the effect of foster care and adoption policy on the probability and timing of adoption and 2) result in the compilation of a state data base that includes foster care subsidy amounts, adoption subsidy amounts and other state-specific foster care and adoption related policies. As priorities in foster care has shifted to promoting adoption, our results will inform policymakers as to the role that subsidies can play in achieving these goals.